24 July 2013
In line with the new PRC labour dispatch rules stipulated in the Decision on Amending the Labour Contract Law (the "LCL Amendment"), released by the Standing Committee of the National People's Congress on 28 December 2012, the Ministry of Human Resources and Social Security (MOHRSS) issued on 22 June 2013 the Implementing Measures for the Administrative Licensing of Labour Dispatch Services (the "Measures"). Both the LCL Amendment and the Measures came into effect on 1 July 2013.
The LCL Amendment explicitly requires that the labour contracts and labour dispatch service agreements signed prior to the issuance of the LCL Amendment (i.e., 28 December 2012) shall continue to be valid until their expiry. In cases where there has been non-compliance relating to the principle of "equal work equal pay", the relevant items and conditions were required to have been amended before the effective date of the LCL Amendment (i.e., 1 July 2013).
The Measures further provide that the labour contracts and labour dispatch service agreements concluded after 28 December 2012 shall be fully performed in accordance with the LCL Amendment. That is, if any provision in the labour contracts or the labour dispatch service agreements are not in compliance with the requirements on (a) the "equal work and equal pay" principle, (b) the nature and types of positions for dispatch arrangement, or (c) the percentage of dispatched staff relative to the total workforce, they shall be amended.
The Measures also emphasise that as of 1 July 2013, no entity or individual may operate a labour dispatch business without an administrative licence, including entities that operated such businesses before the Measures came into effect. The MOHRSS General Office also issued the Circular on the Implementation of Administrative Licensing for Labour Dispatch Services to enhance the supervision and management of labour dispatch enterprises.
Legal Consequences of Non-compliance
The LCL Amendment imposes strict penalties for breaching the labour dispatch restrictions. An employer is required to rectify any violation of the provisions within a period specified by the relevant labour authority. Failure to remedy such a violation may result in a fine of between RMB5,000 and RMB10,000 per dispatched employee.
Since 1 July 2013, if an employer continues to employ a member of staff through dispatch arrangement whose position cannot be categorised as "temporary", "auxiliary" or "substitute", that employee may claim "de-facto employment" directly with the employer. In such a case, the employer may incur a penalty of having to pay double wages for not concluding a written labour contract under the Labour Contract Law.
Points to Consider
In light of the above, companies should observe the following recommendations:
- Make sure the staffing agency you use is a qualified dispatch service provider with a proper licence and registration before making any new labour dispatch arrangements.
- Review and revise the dispatch agreements particularly in relation to (a) remuneration and benefits packages for the dispatched employees in light of the "equal work equal pay" provisions, (b) the nature and types of positions covered under the dispatch arrangement, and (c) the percentage of dispatched staff relative to the total workforce.
- In order to avoid penalties and potential civil claims, ensure that written labour contracts are entered into directly with those dispatched staff whose positions clearly cannot be classified as "temporary", "auxiliary" or "substitute".
Please note that the statutory maximum percentage of dispatched staff relative to the total workforce is yet to be published by the authorities.